Startups and angel investments have become popular ways to acquire financial resources for business development and growth. Although they represent a great opportunity, numerous legal and regulatory obstacles must be overcome. Despite all difficulties, individuals can expect relief.

Startups are young and innovative companies that focus on developing new technologies and business models with the aim of rapid growth and global expansion. On the other hand, angel investments represent the investment of individual investors, the so-called business angels, in startups in the early stage of development. In return, business angels usually acquire part of the ownership and potential benefits in the future. These investments allow startups to acquire the necessary funds for growth and development while investors can realize significant financial gains in the future.

The road from a promising idea to a successful business venture is full of obstacles. While obstacles of a financial nature are highlighted as key, there are several legal and tax circumstances whose importance is not given enough attention.


Since it is a high-risk business for a business angel, it is necessary to carry out the so-called due diligence process with the greatest attention, in which the biggest business risks would be identified. During this phase, analyses are carried out that include, among other things, the financial circumstances of the startup.

Cooperation between a business angel and a startup can be established through several modalities. Whether it’s contracted that the business angel becomes a part of the startup’s proprietary structure by purchasing shares or that investing is done through debt instruments (loans, corporate loans, or other arrangements), convertible instruments, or investing in digital assets issued by the startup, it is necessary that the selected option is the most optimal for both sides. When the most suitable form for achieving cooperation is chosen, a series of issues arise that must be addressed.


The first in the series of questions is the question of the relationship between the business angel, the startup as a company, and its founders. The Accession Agreement determines the amount which the business angel is obliged to pay the company and the percentage of the investor’s participation in the company’s capital, all based on the capital increase. The Memorandum of Association regulates the status form of the company (in practice, most often limited liability company), states the members, percentage, and value of their shares, as well as the questions of total values and structure of the principal capital. However, the most sensitive issues are member relations regulated by other contracts since the Memorandum of Association is published on the website of the Business Registers Agency, and it can be accessed by anyone. One contract with a private law character is the Membership Contract. The subject of this contract may be certain relations between the members, e.g., specific rights and obligations concerning the transfer of shares, the agreement on voting in the assembly, or the question of distribution of profits.


Since startups, as young companies, in addition to financial support, most often find mentors in business angels, people with experience and a wide network of contacts in the sector, business angels are most often chosen from the same activity.

– Conflict of Interest

The provisions of the Companies Act require members who own at least 25% of the shares to notify the company if they have a personal interest in any business or actions taken by the company. Such activities are not forbidden, but it is necessary to issue an approval in accordance with the legal procedure. For violating the mentioned norms, it is provided that every company member has the right to protect their rights with a special type of lawsuit.

Members who own at least 25% of the shares must also not, in their own interest or in the interest of related parties, use the company’s property, information obtained as a member of the company (which is not publicly available), abuse their position in the company, or take advantage of the company’s business opportunities. If they do, the law entitles the company to a special type of lawsuit against that person.

–       Trade Secret

All company members with a share of more than 25% and persons employed in the company are obliged to keep trade secrets, both during the duration of the status of a member or employee and for two years after the termination of the said status. The Memorandum of Association can extend this period, but not for more than 5 years. We have already written about forms of trade secret protection.

–       Prohibition of Competition

The law provides for a special type of lawsuit for a member with a share of more than 25% in the company who, without special approval, has the capacity of a member in another company or is an entrepreneur with the same or similar business activity. The same prohibition applies to the status of an employee or otherwise engaged person in a competing company.


To develop innovations in Serbia, provisions of the Innovation Activities Act prescribed the possibility of economic incentive measures, incentive procedures, and support programs. The Rulebook on the Register of Subjects of the National Innovation System stipulates that the conditions for business angels status can be met by persons who have professional knowledge based on which they understand the risk of investment and who, in the last three years, have invested funds in the amount of at least 5 thousand euros in startups in Serbia. The same rulebook prescribed the obligation for business angels to invest funds in startups in the amount of at least 5 thousand euros once every three years.

Bearing in mind the complexity of the relationships that characterize this form of partnership and the importance of protecting the rights of the parties involved in that business venture, the engagement of lawyers in all phases is the nuance that makes the difference between an unrealized project and a fruitful collaboration. Our law office is at your disposal if you want to ensure your success.

Aleksandar Popović



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